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Singapore’s new VC regime: what it means for PBs, HNWIs

Singapore’s new VC regime: what it means for PBs, HNWIs

Last October, the Monetary Authority of Singapore (MAS) announced the implementation of a simplified regulatory regime for managers of venture capital (VC) funds, as part of the government’s drive to promote Singapore’s fund management industry and increase funding for local start-ups.

Under the new regime, VC managers are not required to have directors and representatives with at least five years of experience in fund management.

They are also not subject to the capital requirements and business conduct rules that currently apply to other fund managers.

Moreover, in admitting and supervising VC managers, MAS said it will focus primarily on existing fit and proper and anti-money laundering safeguards under the Securities and Futures Act.

Law firm Dechert’s Singapore-based partner Dean Collins told Citywire Asia the new regime is expected to ease compliance costs on venture capital managers and lower barriers of entry for smaller venture capital managers.

‘We expect this will be of particular interest to new managers who want to set up a venture capital firm and also international venture capital managers expanding into Asia for the first time.

‘If the new regime translates to a higher number of venture fund managers establishing an office in Singapore, private banks in Singapore might have access to a greater number of product offerings for their clients, although there is no reason why they wouldn’t have access if such funds were established by managers outside of Singapore,’ he said.

To qualify for the regime, a VC manager has to manage funds that are offered only to accredited or institutional investors; invest in business ventures that are not listed on a securities exchange; and invest at least 80% of committed capital in securities that are directly issued by start-ups, to name a few.

As compared to institutional investors who typically have rigorous due diligence processes in place, some high-net-worth investors rely more on governmental regulation to seek comfort on the level of expertise and integrity of the fund manager.

‘One of the main changes under the regime, is that qualifying venture capital fund managers are not required to have directors and representatives with at least five years of experience in fund management.

‘So, this could be seen as an area where investor protection has been weakened,’ Collins said.

However, just like other Singapore asset managers, venture capital managers are required to fulfil 'fit and proper' requirements and comply with stringent Singapore laws about anti-money laundering, corruption, he added.

‘It is not the case that new venture capital managers are no longer subject to the rigorous oversight of the MAS.

‘For other asset managers in Singapore, the existing rules continue to apply although the article explores the possibility that traditional private equity fund managers could potentially seek to qualify under the new regime.

‘Existing asset managers could face increased competition due to new venture fund managers entering the market,’ he warned.

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